the u.s. trade situation for fruit and vegetable products · pdf filethe u.s. trade situation...

19
The U.S. Trade Situation for Fruit and Vegetable Products Renée Johnson Specialist in Agricultural Policy December 1, 2016 Congressional Research Service 7-5700 www.crs.gov RL34468

Upload: hoangthuy

Post on 05-Mar-2018

224 views

Category:

Documents


2 download

TRANSCRIPT

Page 1: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and

Vegetable Products

Renée Johnson

Specialist in Agricultural Policy

December 1, 2016

Congressional Research Service

7-5700

www.crs.gov

RL34468

Page 2: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service

Summary Over the last decade, there has been a growing U.S. trade deficit in fresh and processed fruits and

vegetables. Although U.S. fruit and vegetable exports totaled $6.3 billion in 2015, U.S. imports of

fruits and vegetables were $17.6 billion, resulting in a gap between imports and exports of $11.4

billion (excludes nuts and processed nut products). This trade deficit has generally widened over

time as growth in imports has outpaced export growth. As a result, the United States has gone

from being a net exporter of fresh and processed fruits and vegetables in the early 1970s to being

a net importer of fruits and vegetables today.

A number of factors shaping current competitive market conditions worldwide, and global trade

in fruits and vegetables in particular, partially explain the rising fruit and vegetable trade deficit.

These include:

a relatively open domestic import regime and lower average import tariffs in the

United States, with products from most leading suppliers entering the U.S. duty-

free or at preferential duty rates;

increased competition from low-cost or government-subsidized production;

continued non-tariff trade barriers to U.S. exports in some countries, such as

import and inspection requirements, technical product standards, and sanitary and

phytosanitary (SPS) requirements;

opportunities for counter-seasonal supplies, driven in part by increased domestic

and year-round demand for fruits and vegetables; and

other market factors, such as exchange rate fluctuations and structural changes in

the U.S. food industry, as well as increased U.S. overseas investment and

diversification in market sourcing by U.S. companies.

In the buildup to the 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246),

the trade situation contributed to demands by the U.S. produce sector that Congress consider

expanding support for domestic fruit and vegetable growers in farm bill legislation. Historically,

fruit and vegetable crops have not benefitted from the federal farm support programs traditionally

included in the farm bill, compared to the long-standing support provided to the main program

commodities (such as grains, oilseeds, cotton, sugar, and milk).

The 2008 farm bill provided additional support for specialty crop programs, as well as organic

programs. The farm bill also reauthorized two programs intended to address existing trade

barriers and marketing of U.S. specialty crops, including (1) USDA’s Market Access Program

(MAP) to promote domestic agricultural exports, including specialty crops and organic

agriculture; and (2) Technical Assistance for Specialty Crops (TASC) to address sanitary and

phytosanitary (SPS) and technical barriers to U.S. exports. The 2014 farm bill (Agricultural Act

of 2014, P.L. 113-79) reauthorized and expanded many of the provisions benefitting specialty

crop growers.

Page 3: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service

Contents

Fruit and Vegetable Trade Situation ................................................................................................ 2

Summary ................................................................................................................................... 2 Product Overview...................................................................................................................... 3 Importing Country Overview .................................................................................................... 3

Competitive Market Situation ......................................................................................................... 5

Domestic Import Regime .......................................................................................................... 5 Global Competition ................................................................................................................... 7 Non-Tariff Trade Barriers .......................................................................................................... 9 Seasonal Supplies .................................................................................................................... 12 Other Market Factors .............................................................................................................. 13

Congressional Action .................................................................................................................... 15

Figures

Figure 1. U.S. Fruit and Vegetable Trade (Excluding Nuts), 1990-2015 ........................................ 1

Tables

Table 1. Value of U.S. Fruit and Vegetable Trade, 1990-2015 ........................................................ 2

Table 2. Country Suppliers of U.S. Fruit and Vegetable Imports .................................................... 4

Table 3. Import Share of U.S. Fresh Fruit and Vegetable Demand ............................................... 13

Contacts

Author Contact Information .......................................................................................................... 16

Page 4: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 1

ver the last decade there has been a growing U.S. trade deficit in fresh and processed

fruits and vegetables. Although U.S. fruit and vegetable exports totaled more than $6

billion in 2015, U.S. imports were nearly $18 billion, resulting in a gap between imports

and exports of more than $11 billion for the year (Figure 1). This trade deficit has widened over

time, as growth in imports has outpaced export growth. As a result, the United States has gone

from being a net exporter of fruits and vegetables in the 1970s to having a net trade balance in the

mid-1990s to being a net importer today.

Figure 1. U.S. Fruit and Vegetable Trade (Excluding Nuts), 1990-2015

Source: Compiled by CRS from data in the U.S. International Trade Commission’s Trade DataWeb database

(version 2.8.4). Includes fresh and processed products; excludes nuts.

A number of factors are shaping current competitive market conditions worldwide and global

trade in fruits and vegetables. In the buildup to the 2008 farm bill (Food, Conservation, and

Energy Act of 2008, P.L. 110-246), the trade situation contributed to demands by the U.S.

produce sector that Congress consider expanding support for domestic fruit and vegetable

growers in farm bill legislation. Historically, specialty crops1 had not benefitted from the federal

farm support programs traditionally included in the farm bill, compared to the long-standing

support provided to the main program commodities (such as grains, oilseeds, cotton, sugar, and

milk). The 2008 farm bill, and later the 2014 farm bill (Agricultural Act of 2014, P.L. 113-79),

provided additional support for programs supporting fruit and vegetable production, as well as

programs addressing existing trade barriers and marketing of U.S. specialty crops.

This report presents recent trends in U.S. fruit and vegetable trade, and highlights some of the

factors contributing to these trends. This summary excludes trade data for tree nuts and processed

tree nut products. Although not presented here, U.S. exports and imports of tree nuts and

processed tree nut products (excluding peanuts) have shown continued increases and, generally, a

growing U.S. trade surplus.

1 Specialty crops include fruits and vegetables, tree nuts (not including peanuts), dried fruits, nursery crops, and

floriculture, as defined by the Specialty Crops Competitiveness Act of 2004 (P.L. 108-465).

O

Page 5: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 2

Fruit and Vegetable Trade Situation

Summary

The U.S. trade deficit in fresh and processed fruits and vegetables totaled more than $11 billion in

2015, following a decade of steady gains in U.S. imports, with more variable gains in U.S.

exports (Table 1, Figure 1). In the early 1990s, U.S. imports and exports of fresh and processed

fruits and vegetables were more or less in balance, with some years showing the United States as

a net exporter. This situation reversed in the mid-1990s. Despite rising U.S. exports of fruits and

vegetables, growth in U.S. imports has outpaced export growth. Since the 1990s, imports have

grown by an average of about 5% each year, whereas exports grew an average rate of about 1%

during the same period, measured in terms of trade value (Table 1). The gap between imports and

exports has grown from $0.5 billion in 1990 to more than $11 billion in 2015. The gap in trade

reached an estimated high of $11.4 billion in 2015, given continued import gains accompanied by

stagnated or decreasing exports. This deficit cannot be solely explained by imports of bananas

(Table 1), which are generally not grown in the United States.

Table 1. Value of U.S. Fruit and Vegetable Trade, 1990-2015

Product Category 1990 1995 2000 2005 2010 2015

% Change

1990-2015 ($ billions)

Imports

Fresh, dried, frozen fruit 1.3 1.8 2.6 4.3 5.6 6.6 7%

Fresh, dried, frozen, preserved veg. 1.8 2.3 3.2 4.8 7.3 5.5 5%

Processed fruits and vegetables 2.0 1.9 2.5 3.8 4.8 5.5 4%

Total 5.1 6.0 8.4 13.0 17.7 17.6 5%

Exports

Fresh, dried, frozen, preserved fruit 1.4 1.7 1.9 2.0 2.8 3.4 4%

Fresh, dried, frozen, preserved veg. 2.2 2.9 2.5 3.2 4.7 1.6 -1%

Processed fruits and vegetables 1.0 1.8 1.9 2.1 2.9 1.2 1%

Total 4.6 6.4 6.3 7.4 10.4 6.3 1%

Net Trade (exports less imports)

Fresh, dried, frozen fruit 0.1 -0.1 -0.9 -2.3 -2.7 -3.2 —-

Fresh, dried, frozen, preserved veg. 0.4 0.6 -0.7 -1.6 -2.6 -3.9 —-

Processed fruits and vegetables -1.0 -0.1 -0.6 -1.6 -1.9 -4.3 —-

Total -0.5 0.3 -2.1 -5.6 -7.3 -11.4 —-

Imports, Fresh, dried, bananasb 0.9 1.1 1.1 1.1 1.4 2.1 —-

Source: CRS using data in the U.S. International Trade Commission’s Trade DataWeb database. Includes fresh

and processed products as reflected in U.S. Harmonized Tariff Schedule (HTS) chapters 07, 08, and 20, excluding

nut products (HTS 801, 802, 2008.11, and 2008.19). Totals may not add due to rounding. Data are actual

(nominal) and not corrected for inflation.

a. Based on compound annual rate of growth, or the year-over-year growth rate, over period.

b. As of 2012, all products imported under HTS 0803.90. Previous years included plantains.

Page 6: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 3

Product Overview

Table 1 breaks down U.S. trade into three major product categories: (1) fresh fruit, including

dried, frozen, or otherwise preserved, (2) fresh vegetables, including dried, frozen, or otherwise

preserved, and (3) processed fruit and vegetable products.

Since the mid-1990s, the value of U.S. fruit and vegetable exports has nearly doubled, with the

largest gains in exports of fresh fruits and processed products. For fresh fruits, export gains were

greatest for strawberries/berries, peaches/pears, apples, grapes, and other miscellaneous fresh

fruit. For fresh vegetables, export gains were greatest for lettuce, spinach, tomatoes, potatoes, and

legumes/beans. For processed products, export gains were for processed potato products, certain

preserved vegetables, fruit juices and juice mixtures, and other processed fruit and vegetable

products.

Gains in imports, however, have exceeded those for exports, as the total value of U.S. fruit and

vegetable imports has more than tripled since the 1990s. Increased imports were greatest for fresh

citrus, strawberries/berries, tropical fruits (excluding bananas), grapes, peaches/pears,

plums/apricots, and apples. Imports of fresh vegetables and processed products were higher

across most categories. Imports of preserved mushrooms and processed tomatoes declined over

the period.2

Together, roughly one-half of this trade deficit for fruits and vegetables was composed of bananas

and fresh tomatoes and other vegetables, including bell peppers. Given that the value of U.S.

banana imports has remained largely unchanged, imports of fresh tomatoes and peppers, among

other fresh and frozen vegetables, have accounted for the widening gap in U.S. trade.3 Other

products with a large and increasing net trade value include other tropical fruits, grapes,

asparagus, cucumbers, canned fruit, fruit juices and juice mixtures, olives, and miscellaneous

fresh fruits and preserved vegetables.

Importing Country Overview

Table 2 breaks down U.S. fruit and vegetable imports from the leading supplying countries in

2015. In descending order (by the share of total import value in 2015), these include Mexico

(44%), Canada (12%), Chile (8%), the European Union (7%), China (6%), Peru (5%), and Costa

Rica (3%). Other leading import suppliers were Guatemala, Thailand, Brazil, Argentina, Turkey,

the Philippines, and Ecuador. All other importing countries accounted for about 5% of trade. The

major imported products were tomatoes, peppers, bananas, other tropical fruits, potatoes, onions,

garlic, cucumbers, melon, citrus, grapes, tree fruit, fruit juices, and various fresh and processed

products.

2 Does not include ketchup and tomato sauces (HTS 2103.2), of which the United States remains a net exporter despite

increasing product imports. 3 Both U.S. and Canadian tomato growers initiated import injury cases against each other, which were resolved in 2002

with identical rulings of no material injury; a prior case brought by U.S. growers against Mexico was suspended. See

USITC, “Import Injury Investigations Case Statistics (FY 1980-2008),” February 2010, http://www.usitc.gov/

trade_remedy/documents/historical_case_stats.pdf.

Page 7: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 4

Table 2. Country Suppliers of U.S. Fruit and Vegetable Imports

Country

2005 2015

2005

Share

2015

Share

Leading Product Imports of

Fruits and Vegetables (2015)

($ millions)

Mexico 4,324 10,413 33% 44% Tomatoes, avocados, peppers, grapes,

cucumbers, melons, berries, onions, other

fruits/vegetables

Canada 1,857 2,919 14% 12% Potatoes, tomatoes, peppers, cranberries,

cucumbers, other types of vegetables and fruits

Chile 1,184 1,950 9% 8% Grapes, cranberries, avocados, apples, berries, fruit juices, plums, cherries

EU-28 1,108 1630 9% 7% Olives, mandarins, peppers, other

fresh/preserved fruits and vegetables

China 723 1,404 6% 6% Fruit juices, processed fruit products,

prepared/frozen vegetables/fruits, onions/garlic,

preserved mushrooms.

Peru 272 1,114 2% 5% Asparagus, other preserved/frozen vegetables,

grapes, onions, tropical fruits

Costa Rica 634 737 5% 3% Pineapples, bananas, orange juice, melons,

tropical and preserved fruits and vegetables

Guatemala 445 467 3% 2% Bananas and tropical fruits, preserved/frozen

fruits/vegetables, melons, tomatoes

Thailand 276 406 2% 2% Pineapples, peaches, fruit juices, other tropical

and fresh/preserved fruits and vegetables

Brazil 262 366 2% 2% Orange juice, grapes, other fruit juices, tropical

fruits and vegetables

Argentina 251 301 2% 1% Fruit juices, berries, olives, strawberries, grapes,

garlic

Turkey 100 228 1% 1% Dried apricots, fruit juice, tomatoes, berries, figs

Philippines 188 214 1% 1% Fresh pineapples and juice, bananas, tropical fruits

and vegetables, mixtures

Ecuador 357 189 3% 1% Bananas, other tropical and fresh/preserved fruits

and vegetables, fruit juices

All Other: 975 1,1759 8% 5% —

Total 12,956 23,514 100% 100% —

Source: CRS using data in the U.S. International Trade Commission’s Trade DataWeb database. Includes fresh

and processed products (HTS categories 07, 08, and 20), excluding nut products (HTS 801, 802, 2008.11, and

2008.19). Totals may not add due to rounding. Data are actual (nominal) and not corrected for inflation.

a. Based on compound annual rate of growth, or the year-over-year growth rate, over period.

Page 8: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 5

Competitive Market Situation A number of factors are shaping current competitive market and trade conditions worldwide, and

may be contributing to trends in U.S. fruit and vegetable trade:

a relatively open U.S. import regime and lower average import tariffs in the

United States, with products from most leading suppliers entering the U.S. duty-

free or at preferential duty rates;

increased competition from low-cost or subsidized production of fruit and

vegetable products;

continued non-tariff trade barriers to U.S. exports in some countries,

including restrictive import and inspection requirements, technical product

standards, and sanitary and phytosanitary (SPS) requirements;

opportunities for counter-seasonal supplies, driven, in part, by increased

domestic and year-round demand for fruits and vegetables; and

other market factors, such as exchange rate fluctuations and structural changes

in the U.S. food industry, as well as increased U.S. overseas investment and

diversification in market sourcing by U.S. companies.

Domestic Import Regime

Lower tariffs on U.S. fruit and vegetable imports combined with relatively higher tariffs on U.S.

exports into other countries, in part, may explain why U.S. export growth has not kept pace with

import growth. The U.S. Department of Agriculture (USDA) reports that the global average tariff

for fruits and vegetables is more than 50% of the import value.4 In the United States, however,

about 60% of U.S. tariffs on fruits and vegetables are less than 5%. This compares to Japan and

the European Union (EU), where more than 60% of import tariffs range from 5%-25%;

additionally, nearly 20% of tariffs exceed 25%. Import tariffs in some developing countries are

often higher, with more than 80% of tariffs ranging from more than 25% to over 100%.5

Countries with relatively high tariffs on fruit and vegetable imports include China, Egypt, India,

Korea, and Thailand.

Most of the leading import suppliers of fruits and vegetables to the United States are granted trade

preferences under an existing free trade agreement (Canada and Mexico, Australia, Chile, Peru,

and several Central American and some Middle Eastern nations), pending or negotiated free trade

agreements, or other types of preferential arrangements (Argentina, Brazil, Ecuador, Thailand).6

Such trade preferences allow imports to the United States to enter duty-free or at reduced rates,

and may be contributing to rapid import growth. In some cases, duty-free or reduced tariffs

provide an added advantage to supplying countries that may already benefit from lower-cost fruit

and vegetable production compared to that in the United States.

4 B. Krissoff and J. Waino, “U.S. Fruit and Vegetable Imports Outpace Exports,” Amber Waves, USDA, June 2005.

Expressed as an average; actual tariffs may vary substantially across products and countries. 5 Ibid. 6 For example, products from some countries are eligible for preferential treatment under the Generalized System of

Preferences (see CRS Report RS22541, Generalized System of Preferences: Agricultural Imports). Products from some

South American countries may benefit under the Andean Trade Preference Act.

Page 9: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 6

Many of the countries that have entered into trade preference programs with the United States

supply products such as bananas and other tropical fruits that are grown in limited supplies in the

United States. Many also provide fruits and vegetables counter-seasonally (off-season) to

production in the United States. However, there is concern that an increasing share of imports are

now directly competing with domestically produced commodities throughout the year.

USDA reports significant gains in intraregional trade between the United States, Canada, and

Mexico following the adoption of the North American Free Trade Agreement (NAFTA) in 1994.7

Cooperation on phytosanitary issues and tariff elimination has heightened integration in North

America’s fruit and vegetable markets, resulting in both higher U.S. imports (and exports) of

fruits and vegetables. In particular, U.S. imports of tomatoes and fresh peppers from Mexico have

risen sharply.8 Imports from Canada have also increased but from a smaller base. Mexico and

Canada now account for about one-half of all U.S. produce imports (Table 2). Rising consumer

demand has also influenced imports, given the year-round availability of a wider diversity of

consumer choices, including new products, varieties, and colors and hothouse-grown produce.

Since the U.S.-Chile FTA entered into force in 2004, Chilean imports—particularly imports of

fresh fruits and fruit juices—have continued to increase (Table 2). Most imports from Chile,

however, continue to be supplied during the U.S. off-season. Imports under the U.S.-Dominican

Republic-Central American (DR-CAFTA) FTA,9 which entered into force in July 2006, were

expected to be limited since many of these countries already had duty-free access to the United

States under previous trading arrangements, such as the Generalized System of Preferences (GSP)

and the Caribbean Basin Economic Recovery Act. Imports under DR-CAFTA have increased,

particularly imports of tropical fruits and vegetables but also other fresh fruits.

Previously, some U.S. produce growers had complained that some FTAs were allowing for

greater access to the United States without creating equal U.S. access to foreign markets, and they

further claimed that with each FTA the U.S. produce sectors had been negatively impacted

through higher imports, lower prices, and a growing trade deficit.10

More recent statements by

industry representatives, however, acknowledge the need to continue “leveling the playing field”

of specialty crop exports and imports while also recognizing gains from opening up markets for

U.S. exports in global markets in China and elsewhere.11

Industry representatives as well as the

Agricultural Technical Advisory Committee (ATAC) for Trade in Fruits and Vegetables, a USTR

advisory group, have stated their general support for the Trans-Pacific Partnership (TPP)

Agreement,12

an FTA involving the United States and several other countries.13

An investigation

by the U.S. International Trade Commission (USITC) reports that TPP would benefit the U.S.

produce sectors through reduced phytosanitary barriers to trade and improved market access.14

7 USDA, NAFTA at 20: North America’s Free-Trade Area and Its Impact on Agriculture, WRS-15-01, February 2015. 8 Because of concerns about the effects of NAFTA on U.S. fresh tomato and pepper markets, the NAFTA

Implementation Act (P.L. 103-182, §316) required annual monitoring of these two markets until January 1, 2009. 9 Countries include the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. 10 See, for example, T. Linden, “Ag Trade Surplus Wiped Out by Imports,” Western Grower & Shipper, February

2005; and T. Linden, “Ag Export Surplus Continues to Shrink,” Western Grower & Shipper, December 2004. 11 Testimony by Robert Guenther, United Fresh Produce Association (UFPA) for the U.S. House of Representatives

Committee on Agriculture on “The Importance of Trade to U.S Agriculture,” March 18, 2015. 12 ATAC report for Trade in Fruits and Vegetables regarding the TPP Agreement, December 3, 2015; UFPA, “United

Fresh Welcomes Passage of Trade Promotion Authority,” June 24, 2015; and Western Growers Association, “Press

Statement: Western Growers Reiterates Support for Trans-Pacific Partnership Agreement,” May 19, 2016. 13 Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. 14 USITC, Trans-Pacific Partnership Agreement: Likely Impact on the U.S. Economy and on Specific Industry,

(continued...)

Page 10: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 7

Global Competition

Among the leading U.S. fruit and vegetable import suppliers, China and most European countries

do not benefit from preferential import treatment under current U.S. trade laws. However, fruit

and vegetable imports from these countries are growing, partly because of their lower costs of

producing, packing, and/or processing fruits and vegetables, compared to producers in the United

States. Among many developing countries, lower costs are generally associated with lower

overall production and input costs, particularly for labor. Among EU countries, lower costs

largely are a function of farm subsidies and payments along with other forms of government

support for fruit and vegetable production, as part of the Common Agricultural Policy.

For example, in China, average farm-level costs are low because the majority of farm production

is labor-intensive on small-scale, low-technology operations, using little or no mechanized inputs.

Generally, labor is abundant and costs are low. Marketing costs for produce also are low, given

only basic packing and packaging techniques, and lack of uniform product sizes and grading

standards. At modernized facilities, certain capital and production technology costs are higher, but

per-unit labor costs and overall input costs still remain much lower than in the United States.

Given such differences, available cost data show that average per-unit production costs in China

for tomatoes, peppers, and citrus are roughly one-tenth those in the United States.15

China

remains the world’s largest producer and exporter of many types of fruits and fruit juices.

By comparison, U.S. production costs are relatively high and generally increasing due to rising

costs for energy, transportation, labor, and other farm inputs. In the United States, farm labor

accounts for 42% of the variable production expenses for U.S. fruit and vegetable farms (although

labor’s share may vary depending on the commodity).16

Most fruits and vegetables are fragile and

perishable and must be hand-picked, which limits opportunities for mechanized harvesting.17

In

addition, historically, many U.S. farmworkers have been largely unauthorized, and increased

enforcement of immigration laws is resulting in labor shortages in some production areas,

especially for harvesting tree fruits and specialty row crops. As a result, immigrant guest worker

programs have been a growing priority for U.S. produce growers.18

Higher production costs in the

United States might also be due to a generally more stringent regulatory regime—e.g., workers’

compensation requirements; air, water quality, and land use regulations; and pesticide application

and registration. Studies have shown that such regulations can be costly to producers, particularly

in California, where a large share of the nation’s fruits and vegetables are grown.19

(...continued)

Publication 4607, Investigation. TPA-105-001, May 2016. 15 S. Rozelle et al., “Rising Demand, Trade Prospects, and the Rise of China’s Horticultural Industry,” 2007. 16 P. Martin and L. Calvin, “Labor Trajectories in California’s Produce Industry,” Agricultural and Resource

Economics Update, University of California, vol. 14, no. 4 (March/April 2011). See also University of California-

Davis, “Labor: U.S. Fruits and Vegetables,” Rural Migration News, vol. 17, no. 1, January 2011. Sample cost data for

individual crops grown in California are available at University of California-Davis, “Current Cost and Returns

Studies,” http://coststudies.ucdavis.edu/current/. 17 W.E. Huffman, “The Status of Labor-Saving Mechanization in U.S. Fruit and Vegetable Harvesting,” CHOICES, 2nd

Quarter 2012. 18 See, for example, letter from several Members of Congress regarding concerns about the H-2A agricultural worker

program to officials at the U.S. Department of labor and the U.S. Citizenship and Immigration Services, June 10, 2016. 19 See, for example, previous California Polytechnic State University studies by S. Hurley et al., “Analysis of the

Regulatory Effects on California Specialty Crops: An Examination of Various Issues Impacting Selected Forest

Products, Tree Fruit, Nut, and Vegetable Crop Industries,” January 2006; and S. Hurley, “Comparison Between

California and Its Domestic and International Competitors with Respect to Key Labor Issues,” June 2004.

Page 11: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 8

Farm costs in the EU also are relatively high. However, fruit and vegetable producers in most

European countries directly benefit from support programs that effectively offset their production

costs and allow them to become competitive on world markets. The EU’s fruit and vegetable

subsidies vary by commodity, but often include direct farm payments, compensation for further

processing, co-financing of operational funds for producer organizations, export subsidies,

promotional aid, and other types of support and financial aid.20

Commodities that benefit under

such programs include tomatoes, cauliflowers, stonefruit, olives, grapes, citrus, eggplants, apples

and pears, among others. The total value of support notified to the World Trade Organization

(WTO) for EU’s fruit and vegetable sector (including olive oil) is estimated at about $39 million

(€30.8 million) for the 2012/2013 marketing year.21

The EU wine sectors received another $809

million (€646.8 million) in support. This support includes direct product-specific support, which

is considered to be “production distorting” by the WTO and is subject to reduction commitments.

Comparable expenditures for the U.S. fruit and vegetable sectors were negligible. Other

nonproduct-specific support and other indirect support is not included in these estimates.

In the United States, fruit and vegetable producers do not directly benefit from traditional federal

farm support programs that might help offset their production costs. However, they may benefit

indirectly from certain government research and farm assistance programs that are generally not

considered “production distorting.”22

The European Commission has been implementing reforms

to the current subsidy program for fruits and vegetables that could increase the sector’s market

orientation.23

Even with reforms, the EU’s program would continue to provide government-

funded income support and risk protection not similarly afforded to U.S. producers.

Most developing countries do not directly support their fruit and vegetable production. However,

some have government-funded programs that help farmers obtain specific varieties, adopt better

farming practices, provide research and agricultural extension services, promote exports, and

provide market information. In some countries, preferential policies and support exist at the local

government level, and may include production subsidies or income guarantees, or assistance with

start-up costs. In particular, there has been rising concern about unfair competition and support

within China’s agricultural sectors. Although not involving fruit and vegetable production, the

Office of the United States Trade Representative (USTR) has filed a complaint on behalf of U.S.

farmers alleging that China is not meeting its WTO commitments for rice, wheat, and corn.24

Previous USITC investigations have highlighted the increased competitive market and trade

pressures on U.S. fruit producers from lower-cost foreign fruit and vegetable producers (such as

those in China, Thailand, Chile, Argentina, and South Africa) as well as from countries with

subsidized fruit and vegetable production (such as in the EU, including Spain).25

Import injury

20 For more detailed information, see Council Regulations (EC) 1182/2007 of 26 September 2007 and Commission

Regulation (EC) No 1580/2007 of 21 December 2007. Also see, European Commission, “Reform of the Common

Market Organisation for Fruit and Vegetables,” http://ec.europa.eu/agriculture/capreform/fruitveg/index_en.htm. 21 WTO, Committee on Agriculture, “Domestic Support, European Union,” G/AG/N/EU/26, November 2, 2015. Based

on EU notifications to the WTO, and reflects notified aggregate measure of support (AMS). For more background

information, see CRS Report R41713, U.S. and EU Agricultural Support: Overview and Comparison. 22 See CRS Report R42771, Fruits, Vegetables, and Other Specialty Crops: Selected Farm Bill and Federal Programs. 23 For information, see the European Commission’s “Reform of the Common Market Organization for Fruits and

Vegetables” at http://ec.europa.eu/agriculture/capreform/fruitveg/index_en.htm. 24 USTR, “United States Challenges Excessive Chinese Support for Rice, Wheat, and Corn,” September 2016. 25 USITC, Conditions of Competition for Certain Oranges and Lemons in the U.S. Fresh Market, Inv. 332-469, July

2006; USITC, Canned Peaches, Pears, and Fruit Mixtures: Conditions of Competition between U.S. and Principal

Foreign Supplier Industries, Inv.332-485, December 2007. Reports available at http://www.usitc.gov.

Page 12: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 9

investigations initiated by the United States further highlight concerns that some countries might

be supplying imports at prices below fair market value. Since the 1990s, dumping petitions filed

by the U.S. fruit and vegetable sectors have included charges against imports of fresh tomatoes

(Canada, Mexico), frozen raspberries (Chile), apple juice concentrate (China), frozen orange juice

(Brazil), lemon juice (Argentina, Mexico), fresh garlic (China), preserved mushrooms (China,

Chile, India, Indonesia), canned pineapple (Thailand), table grapes (Chile, Mexico), and tart

cherry juice (Germany, former Yugoslavia).26

Many of these petitions were decided in favor of

U.S. domestic producers and resulted in higher tariffs being assessed on U.S. imported products

from some of these countries.

Non-Tariff Trade Barriers

In addition to tariff-related barriers to trade, market access of agricultural products may be

restricted by non-tariff trade barriers, which may limit both U.S. exports to and imports from

other countries. Non-tariff trade barriers vary widely by importing country and commodity, and

may include, but are not limited to, import and inspection requirements, safety and product

standards, and requirements regarding inputs, production, processing, and mitigation. Generally,

individual country requirements are provided for under WTO agreements that allow governments

to act on trade matters in order to protect human, animal, or plant life or health, provided they do

not discriminate or use restrictions as disguised protectionism.27

There are two specific WTO agreements dealing with food safety and animal and plant health and

safety, and with product standards in general: (1) the Agreement on Sanitary and Phytosanitary

(SPS) Measures, and (2) the Agreement on Technical Barriers to Trade (TBT). The SPS

Agreement is designed to protect animals and plants from diseases and pests, and to protect

humans from animal- and plant-borne diseases and pests, and food-borne risks. The TBT

Agreement covers technical regulations, voluntary standards, and procedures relating to health,

sanitary, animal welfare, and environmental regulations.28

Actual SPS/TBT requirements span

across several broad categories and types, but tend to vary widely depending on the commodity

and the importing country (as shown in the box on page 11).29

Among the more common SPS/TBT examples for produce imports and exports are restrictions

due to pest or disease concerns, and requirements specifying certain post-harvest treatment and

fumigation.30

Other requirements that reportedly have inhibited U.S. fruit and vegetable exports

to some countries are phytosanitary requirements, food safety protocols, and marketing standards.

A summary of the current U.S. concerns regarding SPS and TBT issues across all agricultural

commodities and U.S. trading partners is provided in annual reports compiled by USTR.31

Other

26 USITC, “Import Injury Investigations Case Statistics (FY 1980-2009),” February 2010. 27 See WTO, “Understanding the WTO: The Agreements (Standards and Safety).” 28 The SPS Agreement entered into force on January 1, 1995, as part of the establishment of the WTO, following the

Uruguay Round of the General Agreement on Tariffs and Trade (GATT). The TBT Agreement resulted from the Tokyo

Round in 1979. 29 See CRS Report R43450, Sanitary and Phytosanitary (SPS) and Related Non-Tariff Barriers to Agricultural Trade;

USDA, Analyzing Technical Barriers to Trade, TB1876, March 1999; and F. J. Adcock, “Examining and Reducing

Technical Barriers to Trade,” CNAS 98-3, October 1998, Texas A&M University. 30 Examples within animal product trade include recent trade bans because of bovine spongiform encephalopathy

(BSE), or “mad cow” disease, as well as the current EU ban of U.S. beef because of hormones used in production. 31 USTR’s annual reports—Report on Sanitary and Phytosanitary Measures and Report on Technical Barriers to

Trade—are available at http://www.ustr.gov.

Page 13: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 10

background information is available in CRS Report R43450, Sanitary and Phytosanitary (SPS)

and Related Non-Tariff Barriers to Agricultural Trade.

A summary of some of the reported SPS/TBT barriers to U.S. produce exports follows:32

disease transmission—e.g., fire blight, brown rot, canker, potato wart, fungus,

among others, and other unspecified diseases;

pest transmission—e.g., coddling moth, golden nematode, fruit flies, moths,

among others, and other unspecified quarantine pests;

chemical and pesticide residues—e.g., methyl bromide, hydrogen gas; also

Maximum Residual Levels (MRLs) for certain pesticides;

treatment and mitigation requirements—e.g., chemical and other treatment

options, including fumigation and quarantine;

restrictive import and administrative procedures—e.g., specific inspection

requirements for import;

other administrative requirements—e.g., protocols, risk assessments, waivers,

licenses, import tolerances, packaging requirements;

import bans on products from specific producing areas—e.g., because of

specific pest or disease concerns particular to a region;

import bans on production inputs—e.g., nursery stock, seeds;

product and/or processing specifications—e.g., restrictions on the use of

antimicrobials, sulfur dioxide, sorbic acid, potassium sorbate, biotech and genetic

materials, wax coating, etc.; and

health risks—depending on product and perceived risk.

Non-tariff barriers to trade remain a key concern to U.S. produce growers. For example, under the

U.S.-Korea FTA, despite tariff liberalization and increases in tariff-rate quotas for many fruits and

vegetables, phytosanitary barriers have restricted U.S. exports to Korea of most key fresh fruits,

including apples, pears, peaches, and citrus.33

Also, an ongoing dispute has limited exports of

U.S. fresh potatoes to Mexico, which have currently only been shipped within a 26-kilometer

zone inside the U.S.-Mexico border.34

Similar restrictions and other technical barriers also have

limited U.S. fruit and vegetable exports with other key U.S. trading partners, including Argentina,

Australia, Brazil, Canada, China, EU, India, Israel, Japan, Korea, Mexico, New Zealand, South

Africa, Taiwan, and Venezuela.35

Aside from governmental requirements, retailers in some

32 USDA horticulture trade reports for select products and countries: USDA, U.S. Specialty Crops Trade Issues, annual

reports to Congress (2008 and 2009). Also USDA, FAS Guide To World Horticultural Trade, Trade Issues Editions,

Circular Series FHORT 1-05 (May 2005) and 4-03 (May 2004), submitted as a Report to Congress, as required under

the Specialty Crops Competitiveness Act of 2004 (P.L. 108-465). 33 See Northwest Horticultural Council, 2009 Foreign Trade Priorities, http://www.nwhort.org/TradePriorities.html;

and Report of the Agricultural Technical Advisory Committee on Trade in Fruits and Vegetables on the U.S.-Korea

FTA, April 2007. See also comments submitted to the U.S. Trade Representative from Mark Powers, Northwest

Horticultural Council, “Request for Public Comments to Compile the National Trade Estimate Report on Foreign Trade

Barriers and Reports on Sanitary and Phytosanitary and Standards-Related Foreign Trade Barriers,” Docket USTR-

2009-0031 (http://www.regulations.gov). 34 J. Knutson, “Mexico releases rule involving US potato exports,” Agweek, April 7, 2014; and U.S. Potato Board,

“Stock Potatoes—Export Long Range Plan,” http://www.uspotatoes.com. 35 USDA, U.S. Specialty Crops Trade Issues, annual reports to Congress (2008 and 2009); and USDA, FAS Guide To

World Horticultural Trade (2004 and 2005). Also see USTR’s two annual reports for all traded products: Report on

Sanitary and Phytosanitary Measures, and Report on Technical Barriers to Trade, http://www.ustr.gov/.

Page 14: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 11

countries have developed required standards and practices and require certification as a

prerequisite for doing business. For example, EU’s retail-based GLOBALGAP (formerly known

as EUREPGAP) for fruits and vegetables specifies a list of requirements regarding traceability;

recordkeeping; varieties and rootstocks; site history and management; soil and substrate

management; fertilizer usage; irrigation; crop protection; harvesting; post-harvest treatments;

waste and pollution management; recycling and reuse; worker health, safety, and welfare;

environmental issues; complaint form; and internal audits.36

However, many U.S. trading partners point to U.S. phytosanitary and other technical

requirements as possible barriers restricting imports of these same commodities from other

countries. In the United States, USDA’s Animal and Plant Health Inspection Service regulates

fresh produce imports through phytosanitary certificates, importation rules, and inspections.37

U.S. imports of some fresh fruits and vegetables are also subject to federal marketing orders that

require written permits for imported fresh produce or create mandatory grade, size, quality, and

maturity requirements that apply to domestic and imported products.38

Broad SPS/TBT Categories

SPS Categories:

additives and pesticide residues/use;

plant pests and diseases;

microbiological contaminants;

chemical contaminants;

genetically modified plants;

irradiation; and

various overlapping technical requirements, such as labeling and standards, including Good Agricultural

Practices (GAP) or land-use practices, use of third party auditors, etc.

TBT Categories:

import quotas and administration (such as licensing and auctions);

export limitations and bans;

food laws, including quality standards, safety and industrial standards, and organic certification;

input, process, and product standards, including domestic content and mixing requirements, rules-of-origin

requirements;

packaging standards and labeling requirements;

laws and import procedures, including media advertising regulations;

consumer and food safety regulations—e.g., labeling, packaging, pesticide residue testing, nutritional content

labeling, and contamination prevention;

measures to prevent consumer fraud—e.g., shipping and financial documentation, standards of identity and measurement, etc.

36 See GLOBALGAP requirements at http://www.globalgap.org/cms/front_content.php?idcat=9. 37 7 C.F.R. Part 319.56 requires written import permits for fresh produce and also lists detailed foreign quarantine

notices for fruit and vegetables. 38 Agricultural Marketing Agreement Act of 1937, Section 8e. Currently applies to avocados, dates (other than dates for

processing), hazelnuts (filberts), grapefruit, table grapes, kiwifruit, olives (other than Spanish-style), onions, oranges,

Irish potatoes, plums (suspended), prunes (suspended), raisins, tomatoes, and walnuts.

Page 15: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 12

Seasonal Supplies

As consumer demand for fruits and vegetables has grown, the United States has become a

growing market for off-season fruit and vegetable imports. Most counter-seasonal trade occurs

between the Northern and Southern Hemisphere countries, which often tend to have opposite

production cycles. Improvements in transportation and refrigeration also have made it easier to

ship fresh horticultural products. Counter-seasonal U.S. imports of fruits and vegetables are

supplied by Chile, Argentina, Australia, and South Africa, but also to some extent Mexico and

some Central American countries.

Counter-seasonal imports from these countries are said to complement U.S. production of fresh

grapes, citrus, tree fruits, and berries. However, technological and production improvements are

further influencing this trend. In particular, the development of early- and late-maturing varieties

has expanded U.S. production seasons, allowing producers to grow many types of fruits and

vegetables throughout the year. As the U.S. production season has expanded, the winter window

for some imports has narrowed. As a result, imports of some fruits and vegetables are directly

competing with U.S. production. These include fresh tomatoes, peppers, potatoes, onions,

cucumbers, melon, citrus, grapes, apples, and other tree fruits. Imports of processed fruit and

vegetable products, such as fruit juices and various processed fruits and vegetables, directly

compete with U.S. processed products year-round.

Imports of counter-seasonal fruits and vegetables are generally considered to have a positive

impact on U.S. consumer demand by ensuring year-round supply and by introducing new

products and varieties, which often stimulate additional demand. Other perceived market benefits

include lowering costs (given a wider supply network), improving eating quality, assuring food

safety, conducting promotions, and reducing product losses. For example, imports of fresh

tomatoes may have contributed to increased overall demand by providing for the introduction of

new domestic varieties, including hothouse-grown tomatoes, that are valued by consumers for

their taste, perceived higher and consistent quality, and wider year-round availability; similarly,

imports of peppers, cucumbers, and sweet onions have contributed to increased demand through

the introduction of new colors, mini-varieties, and other highly regarded product qualities.39

This expansion in consumer choice has contributed to overall higher demand for fruits and

vegetables. Between 1980 and 2010, per capita consumption of all fresh and processed fruits and

vegetables increased from roughly 600 pounds to a high of more than 710 pounds in the late

1990s, and dropping back to about 650 pounds in 2010.40

Gains in consumption, in turn,

necessitate the need for year-round supplies, resulting in higher counter-cyclical import demand.

During the period from 1980 to 2005, imports as a share of total domestic consumption nearly

doubled from about 27% to nearly one-half for all fresh fruits, and more than tripled from 8% to

about 25% for all fresh vegetables (Table 3). These averages mask even greater import gains for

some commodities. Imports of grapes, asparagus, and garlic, for example, accounted for roughly

10% of consumption in 1980 and altogether now account for at least 50%. More recent USDA

estimates show continued growth in imports as a share of all fruit and vegetable consumption in

the United States.41

39 S. R. Cuellar, Marketing Fresh Fruit and Vegetable Imports in the United States: Status, Challenges and

Opportunities, Cornell University, March 2003. 40 USDA’s Food Availability (Per Capita) Data System, https://www.ers.usda.gov/data-products/food-availability-per-

capita-data-system/. Fresh weight equivalent. 41 USDA is updating these data. New estimates are not yet available but will be posted at https://www.ers.usda.gov/

topics/international-markets-trade/us-agricultural-trade/import-share-of-consumption.aspx.

Page 16: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 13

There also is concern from some that the availability of imports may be lowering prices for fruits

and vegetables because of increasing overall supplies. However, producer prices paid for fresh

fruits and vegetables have remained strong and have generally tracked overall increases in food

prices, although price changes may vary for individual commodities.42

Table 3. Import Share of U.S. Fresh Fruit and Vegetable Demand

Category

1980 1990 2000 2005 2010

(percent)

All Fresh Fruit 26.7 34.9 42.4 45.6 48.8

All Fresh Vegetables 8.0 10.3 13.2 17.7 24.5

Apples 4.0 4.7 7.3 7.0 6.8

Asparagus 10.8 29.8 59.0 72.2 89.1

Broccoli 0.2 2.5 6.6 11.6 14.8

Carrots 7.8 5.9 6.4 7.7 13.4

Cherries 1.0 3.8 3.6 8.2 11.0

Cucumbers 36.0 33.7 42.6 52.1 61.8

Garlic 12.5 17.4 29.0 48.0 59.5

Grapes 13.6 37.0 45.2 54.9 50.3

Lettuce <0.5 <0.5 <0.5 1.9 4.4

Melon 10.3 15.5 25.1 26.6 28.9

Onion 5.5 10.1 9.1 11.1 14.5

Oranges 0.7 0.9 3.1 4.6 7.8

Peaches/Nectarines 0.6 8.0 6.5 11.0 7.5

Peppers 26.5 38.9 33.8 46.9 53.1

Plums 0.5 13.4 15.5 26.6 25.0

Strawberries 2.8 4.0 5.4 7.1 8.9

Tomatoes 22.3 20.5 30.0 35.2 52.3

Source: Calculated by CRS from USDA Supply and Disappearance data, including Vegetables and Pulses Yearbook

data, Supply and Utilization tables, and Fruit and Tree Nut Yearbook data, Table H-12. Expressed as quantity of

imports’ share of total disappearance. USDA is updating these data. New estimates are not yet available but will

be posted at https://www.ers.usda.gov/topics/international-markets-trade/us-agricultural-trade/import-share-of-

consumption.aspx.

Other Market Factors

Among other market factors widely known to contribute to shifts in global agricultural trade are

exchange rate fluctuations and structural changes in the U.S. food industry, including increased

U.S. overseas investment and diversification in market sourcing by U.S. companies.

42 See, for example, USDA Fruit and Tree Nut Data, Producer price indexes (2007-20016), https://data.ers.usda.gov/

reports.aspx?reportPath=/TradeR3/CPI_cu_fruit&stat_year=2007&domain=Fruit&summary=True&groupName=

Sum%20fruit.

Page 17: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 14

Generally, as the dollar depreciates against foreign currencies, U.S. exports become more

competitive and relatively less expensive than commodities produced domestically in the

importing country, indicating a subsequent increase in price competitiveness for U.S. exports or a

relative increase in import prices. Conversely, as the U.S. exchange rate appreciates (stronger

dollar), U.S. exports may become less competitive or relatively more costly.43

Information from

USDA’s Agricultural Exchange Rate Data Set indicates that as the U.S. dollar has steadily

depreciated each year since 2002, U.S. agricultural products, including fruit and vegetable

exports, have likely become more price competitive. However, the extent to which this will

actually result in reduced prices on imported products in a foreign country will ultimately depend

on how much an exporter or importer is willing to pass on to customers.44

Monetary policies

within a country, such as China’s fixed exchange rate, may also affect its export potential by

influencing relative price differences between countries. Further appreciation of the Chinese

exchange rate could make imports more affordable, thus raising U.S. agricultural exports.45

Other factors reportedly influencing produce trade are evolving business practices in how produce

is marketed and sold. A USDA study highlights some of these factors for the produce industry.46

They include increased consolidation and concentration in the retail and shipping sectors, and the

emergence of new industry trade practices including increased use of fee-based services,

additional packaging and certification requirements, increased use of contract and marketing

agreements with buyers, and development of emerging technologies and improved transportation.

The extent to which these factors may be influencing the individual produce sectors varies by

commodity and also by marketing channel (e.g., retail versus food service sectors). Structural

changes in the U.S. food industry are further influenced by other economic and market changes

that are occurring, including increased diversification in supply sourcing and increased foreign

investment and global integration by U.S. agribusiness firms.

A growing share of U.S. fruit and vegetable trade (both imports and exports) is carried out by

U.S. and foreign multinational companies or enterprises. These companies may produce the

products they trade, while some may only further process products and some companies only

trade the products of other firms. Among the reasons why companies choose to extend their

businesses globally are to build a global supply base to ensure continued, year-round supplies to

meet demand, but also to source lower-cost production in countries with relatively lower input

and technology costs, particularly for labor. These trends may have been facilitated by the cross-

national economic and financial integration that has followed bilateral and multilateral

agreements among countries.47

The increasing importance of multinational companies and their role in international trade

complicates an analysis of global trade statistics. This includes cases where a U.S. company has

subsidiaries located overseas, where products are produced and processed, but marketed under the

company’s own branded labels; in other cases, a U.S. company may import foreign processed

products made from U.S.-exported raw material abroad only to be re-imported to the United

States as finished products. For example, a recent USITC import investigation highlights how

U.S.-based Dole Food Company owns and operates fruit canneries in Thailand that rely largely

43 For more information, see Kristinek, J., and D.P. Anderson, “Exchange Rates and Agriculture: A Literature Review,”

Working Paper 02-2, February 2002, Texas A&M University. 44 See, for example, USDA’s Agricultural Exchange Rate Dataset. 45 USDA, China Currency Appreciation Could Boost U.S. Agricultural Exports, WRS-0703, August 2007. 46 USDA, U.S. Fresh Fruit and Vegetable Marketing: Emerging Trade Practices, Trends, and Issues, AER-795,

January 2001. 47 L. Bloodgood, et al., “Trends in U.S. Inbound and Outbound Direct Investment,” USITC Pub. 3870, July 2006.

Page 18: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 15

on imported fruit from the United States to produce canned peach, pear, and mixed fruit products,

which are repackaged into plastic jars and cups in Thailand, and then re-exported back to the

United States in the form of retail-ready products.48

Thailand’s competitive advantages in

producing canned fruit are based primarily on relatively inexpensive labor and technological

investments provided by Dole Food Company, which accounts for the majority of Thailand’s

peach and pear canning industry through its subsidiary Dole Thailand Ltd. Thailand is currently a

leading global exporter of canned peaches, pears, and fruit mixtures, despite its insignificant

domestic production of fresh peaches and pears.

Many U.S. companies are implementing business strategies that source complementary fruit and

vegetable products globally, which some argue may compete with domestically produced product.

An import injury investigation brought by U.S. mushroom processors highlights competition

concerns by some domestic producers about competition from imports of transnational

production by U.S.-based multinational companies. Among the marketers of preserved

mushrooms participating in the case was General Mills, Inc., which imports a range of food

products produced and processed by its subsidiaries overseas (in Indonesia and India among other

countries), including preserved mushrooms that are marketed under its Green Giant brand.

Among the reasons General Mills officials cite for establishing overseas operations are year-

round product availability and lower labor costs.49

Some companies do not own and operate foreign operations, but instead enter into licensing

arrangements with other foreign companies who produce, pack, or process products, which are

marketed under the company’s own branded labels and either sold in the United States or in other

foreign markets. Examples of such firms were described in another USITC import investigation

into the global sourcing strategies among the major global suppliers of fresh oranges and lemons.

Reasons cited by some U.S. produce companies for implementing global business strategies

include the desire to source complementary fruit and vegetable products globally to meet year-

round demand, reduce processing costs, and build an international customer network and brand

recognition.50

Congressional Action Starting in 2005, the Specialty Crop Farm Bill Alliance began promoting recommendations for

the 2008 farm bill, initially through the efforts of the United Fresh Produce Association51

and a

number of specialty crop organizations nationwide. The alliance’s goal has continued to work

toward enhancing the competitiveness of U.S. fruits, vegetables, tree nuts, and other specialty

crops by promoting specific programs and provisions as part of the periodic omnibus farm bill,

including the most recent 2014 farm bill.

In the buildup to the 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246),

concerns over the trade situation for fruits and vegetables, among other production issues,

48 USITC, Canned Peaches, Pears, and Fruit Mixtures: Conditions of Competition between U.S. and Principal Foreign

Supplier Industries, Inv. 332-485, December 2007. Most imports to Thailand are supplied in institutional-size cans. 49 Hearing before USITC, regarding certain preserved mushrooms from Chile, China, India, and Indonesia, Inv. 731-

TA-776-779, September 9, 2004. 50 See, for example, “A Cooperative Evolution—Sunkist Competes in the Global Market,” a presentation by Sunkist

Inc. officials at the USDA Agricultural Outlook Forum, February 20, 2004; and USDA, U.S. Fresh Fruit and Vegetable

Marketing: Emerging Trade Practices, Trends, and Issues, AER-795, January 2001. 51 The association represents the produce industry, and resulted from a 2006 merger of the United Fresh Fruit &

Vegetable Association and the International Fresh-Cut Association.

Page 19: The U.S. Trade Situation for Fruit and Vegetable Products · PDF fileThe U.S. Trade Situation for Fruit and Vegetable Products ... the U.S. food industry, ... The U.S. Trade Situation

The U.S. Trade Situation for Fruit and Vegetable Products

Congressional Research Service 16

contributed to demands by the U.S. produce growers that Congress consider expanding support

for domestic fruit and vegetable growers in farm bill legislation. Historically, fruit and vegetable

crops have not benefitted from the federal farm support programs traditionally included in the

farm bill, compared to the long-standing support provided to the main program commodities

(such as grains, oilseeds, cotton, sugar, and milk). The 2008 farm bill contained a horticultural

title that included new and expanded provisions for specialty crops and organic production. These

programs and provisions were reauthorized and in some cases expanded as part of the 2014 farm

bill (Agricultural Act of 2014, P.L. 113-79).

Among the farm bill’s key trade-related provisions are those that specifically address SPS/TBT

issues in the specialty crops sectors, as well as those that generally address export market

promotion and barriers to U.S. trade:52

Market Access Program (MAP). Reauthorized MAP funding to encourage

domestic exports, and included an amendment to cover organic products.53

MAP

funds cost sharing of foreign market promotion activities.

Technical Assistance for Specialty Crops (TASC). Reauthorized TASC

program to address SPS and technical barriers to U.S. exports, and required an

annual congressional report describing factors that affect specialty crops

exports.54

Eligible projects include seminars and workshops, study tours, field

surveys, pest and disease research, and pre-clearance programs.

Both the 2008 and 2014 farm bills also provided for a range of other programs and support that

generally support the specialty crop sectors but may also enhance exports and trade, including

expanded plant pest and disease management and detection; increased collection of market data

and information; and increased specialty crop food safety and related research issues, among

other provisions. Often, farm bill legislation might also amend marketing orders governing the

grades and standards for some commodities and requiring imports to meet similar standards.

Information on these and other farm bill provisions directed to the specialty crop sectors is in

CRS Report R42771, Fruits, Vegetables, and Other Specialty Crops: Selected Farm Bill and

Federal Programs.

Author Contact Information

Renée Johnson

Specialist in Agricultural Policy

[email protected], 7-9588

52 Two SPS-related provisions that were proposed as part of the 2008 Senate-reported farm bill (H.R. 2419), however,

were dropped during conference negotiations. One provision proposed that USDA and the U.S. Trade Representative

increase attention to specialty crop SPS trade issues and develop a strategic risk management framework. Another

provision would have required the Government Accountability Office (GAO) to investigate the impact on specialty

crops of reducing foreign trade barriers and to prepare a strategy for addressing the issue. 53 For more information, see USDA, http://www.fas.usda.gov/programs/market-access-program-map. 54 For more information, see USDA, http://www.fas.usda.gov/programs/technical-assistance-specialty-crops. For

purposes of TASC, a “specialty crop” is defined as “all cultivated plants and the products thereof produced in the

United States except wheat, feed grains, oilseeds, cotton, rice, peanuts, sugar, and tobacco.”